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Crystal Pepsi: A Giant’s Failure Essay

We all have heard and seen it over and over again in commercials, movies, documentaries, stories, about Pepsi and its huge line of products. But very few of us (nationally and internationally) know about the company and its history. PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay. Pepsi-Cola was created in the late 1890s by Caleb Bradham while Frito-Lay Inc. was formed by the 1961 merger of the Frito Company, founded by Elmer Doolin in 1932. Throughout its history, PepsiCo has introduced number of products for its consumers from cola to water, to teas and dark chocolate mocha. It went through number of transformation and acquired several other companies along its way. Today, Pepsi is one of the largest food and beverage companies in the world operating nationally and internationally1. However, it has seen many failures on its way to success. One of its failures is Crystal Pepsi, introduced in April 1992 as a colorless drink with a market slogan “You’ve never seen a taste like this”2. The main strategy was to introduce its colorless drink with fewer sweeteners to its health conscious consumers. The marketing began in 1990s and was tested in Denver, Sacramento, Dallas and Providence that resulted positive3. The paper discusses about its making, marketing mix, target market, competition and failure in detail. Product

Every big business whether it is retail, manufacture or service depends on some kind of a product or product line it’s introduced. A proper strategy is required to sustain in market especially when competition is tough and rival is continuously coming up with some strategy to get the first movers advantage. Products that lack continuous innovation often suffers up to the extent that the internal or external forces ultimately drive them out of business. Crystal Pepsi is such product that gained the attention of consumers by its fancy name but lost the market in no time due to its lack of innovation. Although, PepsiCo tried hard to sustain its beloved product by introducing it in diet and different flavors but all strategies failed miserably.4 The making

Crystal Pepsi by Pepsi was first introduced in 1992 and remained a mystery not only for its consumers but also to its manufacturers in terms of sales, strategy and market share. It was one of the most fascinated drinks when introduced as it was a colorless cola that provides relief from thirst and has health benefits simultaneously. The idea, however, was captured from the remake of Ivory Soap from its classic milky solution. There were two reasons behind the launch of Crystal Pepsi; Competition and a shift of consumer taste towards healthier beverages5. Crystal Pepsi targeted the market right but failed in both as the drink was nothing but a combination sugar and water with little flavor in it. Taste

It was first marketed as the caffeine free, naturally flavored with preservatives drink that is different from other colas in many ways as it uses fewer sweeteners, equating as clearness with purity and health. The drink also claimed to be lighter than other drinks and Pepsi itself. Moreover, the drink was then introduced in lime flavor as well which was a part of limited edition and sales promotion. PepsiCo tried to save its product by adding citrus flavor to it. The company also shorten its name to Crystal and added “from the makers of Pepsi” on the packaging to give it a new brand image and changed formula but failed again. As the sales went down drastically all major projects related to Crystal Pepsi were put to halt that resulted in its disappearance from the shelves and discontinued supplies6. Packaging

After receiving the positive response from its test market, PepsiCo decided to launch the product in United States and Canada to gain the maximum market share. A large campaign was launched and it was the first time in the company’s history a first photo-realistic, computer generated bus wrap was invented to advertise the product. The bottles were designed in the most sophisticated packing with a combination of blue, red, and silver prominent colors giving it a refreshing looks. It was also available in different sizes from 2 liters bottles to 250 ml cans7. Promotion

The promotion strategy is one of the most significant parts of business. One of the best quotes about the importance of advertising is by Stuart Henderson Britt and goes like this: “Doing business without advertising is like winking at a girl in the dark. You know what you are doing but nobody else does.” Obviously, like any other strategy promotion strategy consist of introduction, growth, maturity and decline but Crystal Pepsi is among those products that came in the market with a bang but suffered terribly since after. Advertising

Crystal Pepsi started it full marketing campaign in 1992 nationally including media campaign featuring Van Halen’ music, “Right Now”. This gave boost to sales in the market for a short period of time but went down again due to its competition with its rival Coca Cola. The Advertisement also appeared in on network TV during Super Bowl XXVII on January 31st, 1993. PepsiCo has always been famous for its promotion and the time and money company spend on its every product line. PepsiCo was doing all it could to sustain the product in the market by using different electronic media resources available at that time. Promoting Crystal Pepsi through advertisements on buses and on merchandizes like pool float, glass and wall clock were few of its marketing strategies to improve the sales. Like many other companies, Pepsi also arranged promotions with major retailers like Walmart but it didn’t ended well. The other promoting methods that used were radio commercials and major newspapers including USA Today. The major factor that Pepsi was unable to recognize at the time of promotion was the differentiation. It stressed on the importance of product attributes like fewer sweeteners, less calories, flavored drink etc. when the time was to segregate itself from regular carbonate drink to more of an energy drink. Changing names, color of the packaging and commercial medium wasted time and money of the company that ultimately result in the failure of the product8. Price

The pricing strategy is crucial in any decision making process. Often times products that are new in market are either priced too high or too low. For any company that has vast experience in customer relationship and dealing, pricing strategy is of greatest importance. The price of its product should reflect the quality of the product as well as the reaction of consumers. If the price is set too low then the customers would reject the product and vice versa. In any case the strategy for Crystal Pepsi was the same; to penetrate. Pricing Strategy

According to various sources, Crystal Pepsi was sold at regular cola prices which means no major efforts were put forth to enforce the selling of the product at higher prices. Crystal Pepsi at first gained a lot of attention from the other soda drinkers and they lined up to try this new refreshed cola that promotes healthy drink and fewer sweetener. The sales were skyrocketed and company made more than expected profits. However, the customers found no difference between sprite and 7up and eventually gave up on Crystal Pepsi. The price never went down but instead changes were made on its appearance to gain attention through attraction9. Consumer’s Reaction

The pricing was not the issue in the case of the cola. Crystal Pepsi was selling good at the asking price varying from 89 cents to a dollar in 90s. When the cola was disappeared from the market it was due to its taste and by the end of its time period, the cola lost major part of its target market. Today, Crystal Pepsi is still available on websites such as eBay and Amazon where the ask prices vary from $50 to $10010. Lately, few videos were made by students at several universities on YouTube asking Pepsi to bring back Crystal Pepsi again. The future of Crystal Pepsi, however, is still unknown. Pepsi has tried many times to bring back Crystal Pepsi in National and International markets but was unable to fully penetrate because of severe competition posed by its either competitors or the companies that already have significant market share. Place

The placing of the product plays a vital role in increasing sales revenue and gaining the maximum profit from the market. But like promotion, placing depending on emphasis. Crystal Pepsi has emphasized and stressed on promoting its formula and stretched to convince people that how different this cola is and what health benefits would they get after drinking it11. The mistake that was done by PepsiCo was in differentiation and positioning of its product. The product was different than regular Pepsi-Cola and Coca-Cola but had the same appearance and taste as of 7up and Sprite. That is why it became hard for Crystal Pepsi to differentiate itself in the market and form a new image in its consumer’s minds. Distribution

Crystal Pepsi was first taste tested by participants from different target markets and then was released to test market in April 1992. The launch was limited to test the reaction of its target consumers. The test markets were conducted in Denver, Dallas, and Providence, Rhode Island for nine months straight bringing all the possible changes to the formula according to the preferences of the consumers. It was then launched nationally during December 1992. Crystal Pepsi was among the favorite drinks of its consumers at that time and gained a good market share in matter of weeks. People tried it partially due to curiosity just to see what’s new in there12. It was available at all the major retailers like Walmart and did very well in sales. After its launch in the United States it was launched in Canada, Europe and Australia for limited time. The time span for Europe was the highest among all the markets but ultimately pulled off the shelves due to poor sales13. The Canadian and Australian Markets responded the same as United States but since Crystal Pepsi held different grounds in terms of taste and appearance, it lasted longer than United States. Pepsi later introduced Pepsi Max in Australia replacing Crystal Pepsi during the summer of 1993. Mexico

A newer version of Crystal Pepsi under the name of Pepsi Clear was introduced in 2005 in Mexico. However, it was available for a limited time and in quantity in the market. It was another attempt to revive the product in an international market where diet colas are among the most favorite drinks. The product was not a failure but discontinued after the limited time14. Target Market

One of the sensitive and time consuming decisions for any company to make is to get proper knowledge of its target market. Many companies have failed to properly evaluate the preference and taste of its target markets and vanished completely or at least their product lines were disappeared from the market. Crystal Pepsi focused on two types of consumers;

1. Health conscious individuals
2. People who prefer white soft drinks over colas

Health Conscious Individuals
The first target market was quite easy to capture because at the time of its launch people in most of the developed countries were getting health conscious. They made exercise their part of life. It was the start of an era where people begun to think of their fitness and gave workout and fitness priority15. PepsiCo targeted those individuals and presented them an innovative drink with fewer sweeteners and lower calories to help them in achieving their fitness goals. By removing the brown color from the regular cola, Crystal Pepsi easily made an impression of pure drink by presenting an image of “good health, purity and icy cold-water” to its drinkers. Soft-drinkers

The other category was hard to tackle as many colorless soft-drinkers were already committed to their existed products and were brand loyal. However, the marketing strategy done by PepsiCo paid off during its launch and people tried the new product for the change. However, this market wasn’t captured at all and people went back to their original drinks completely ignoring Crystal Pepsi16. PepsiCo put all of their focus and attentions toward this group by changing formulas, packaging and differentiation, putting their health conscious group at stake. They lost both markets in matter of months17. Competitors

PepsiCo has always been and still is in direct competition with Coca-Cola, another food and beverage giant. The competition is so severe that they spend millions of dollars to protect their secrets from one another just like many major companies in Silicon Valley. Although the rivalry between Pepsi and Coca-Cola is always severe, the other rivals were tough too. First Movers Advantage

Crystal Pepsi was one of its kind products that was first introduced to a limited target market, made a huge impact in its test market, launched with a refined formula, failed and disappeared in 15 weeks. It is one of the most anticipated products by PepsiCo still demanded by many consumers to date. Crystal Pepsi has enjoyed its top spot for few months and has gained the first mover advantage. They spell bound the market with its fewer sweeteners, low calories and new formula with amazing prices in the market. Consumers liked the taste initially as it was a 90s reason to drink cola without color, caffeine or preservatives1819. Competition

Crystal Pepsi was introduced to directly compete with already existed products in the market such as Clearly Canadian. This and similar products were already held the major market share and stayed strong in its demand vs supply. They addressed the need and want of its consumers more strongly as compared to its competitors. Crystal Pepsi when came in targeted its competition in a unique way. Although the cola was colorless, it was a direct threat to Clearly Canadian and Quibell. Clearly Canadian and Quibell both offered non-carbonate drinks that were the market segment of soft-drinkers. Their products still exists in the market in many flavors. Coca-Cola, on the other hand, tried to come up with same product but with different strategy and named it as Tab Clear which also failed in market miserably. Although Coca-Cola also pushed its product like Pepsi, the results were the same for both the companies. Reason for failure

As mentioned earlier in the discussion, the major contributor for failure of product was lack of differentiation. PepsiCo stressed over its new formula but failed to meet the expectation of consumers. It was hard for customers to tell the difference between Crystal Pepsi and 7up or Sprite. Crystal Pepsi failed to target its market accurately. The cola was launched for health conscious individual and soft-drinkers20 but lost its way to form a brand image in the minds of consumers. One other factor for failure was poor name execution. Crystal Pepsi was named crystal to give it an image of pure drink that was more attracted to older generation as compared to the younger ones. The younger generation was still drinking regular colas that had the same cost as of Crystal Pepsi. Evaluation/Critique

The product was made with an intention to target the consumers that are health conscious and working their way out towards healthy lifestyle. The
lack in differentiation and positioning of product made things worse for Crystal Pepsi that was in competition since its launch. Emphasizing on new formulas over and over again, cost the company enormous sum of money and time. Overall, the product was never seen as a failure, rather, an opportunity to study the market accurately for future products.

1. Miller, Cyndee. (1993, February). Ebsco Host Database. Trendy marketers want consumers to see right through their products. http://gsuproxy.govst.edu:3963/ehost/detail?vid=3&sid=95159dfc-8f54-472c-98c0-0c533cb0e06b%40sessionmgr115&hid=117&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=17599561 2. Lavinsky, David. (1993, March). Ebsco Host Database. “When Novelty wears off, soft drinks clearly will fail”. http://gsuproxy.govst.edu:3963/ehost/detail?vid=10&sid=95159dfc-8f54-472c-98c0-0c533cb0e06b%40sessionmgr115&hid=117&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=17598728 3. Triplett Tim. (1994, May). Ebsco Host Database. “Consumers show little taste for clear beverages”. http://gsuproxy.govst.edu:3963/ehost/detail?vid=13&sid=95159dfc-8f54-472c-98c0-0c533cb0e06b%40sessionmgr115&hid=117&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bsh&AN=9410311353 4. Laura Zinn. “Pepsi’s future becomes clearer”. Bloomberg Business week. January 31st, 1993 < http://www.businessweek.com/stories/1993-01-31/pepsis-future-becomes-clearer 5. Eben Shapiro. “It’s a transparent attempt to revive Pepsi’s Cola sales”. The New York Times. April 13th, 1992. < http://www.nytimes.com/1992/04/13/business/it-s-a-transparent-attempt-to-revive-pepsi-s-cola-sales.html?action=click&module=Search®ion=searchResults&mabReward=relbias%3Ar&url=http%3A%2F%2Fquery.nytimes.com%2Fsearch%2Fsitesearch%2F%3Faction%3Dclick%26region%3DMasthead%26pgtype%3DHomepage%26module%3DSearchSubmit%26contentCollection%3DHomepage%26t%3Dqry51%23%2Fcrystal%2Bpepsi%2F 6. Editorial review. “New Pepsi drinks offer clear choice”. Dayton Daily News. December 13th, 1992. < http://nl.newsbank.com/nl-search/we/Archives?p_action=doc&p_docid=0F5052CF4CD4FA55&p_docnum=7 7. Del Jones, USA Today. “Even good CEOs pick the wrong direction”. ABC News. November 7th, 2007. < http://abcnews.go.com/Business/story?id=3830073 8. Jeff Hirsch and Tom

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